The central bank of India takes measures to protect the country’s economy from the excessive revaluation, meaning that the rupee could weaken significantly in 2017.
According to Deutsche Bank, the Indian currency fell to the lowest level in November 2016. However, overall in 2016 the rupee was quite stable, falling by only 2.7% against the dollar during the year.
In the period from late 2013 to 2016, the Indian rupee rose by 16% in real effective exchange rate terms.
Analysts at Deutsche Bank say that the Reserve Bank of India is unlikely to tolerate constant appreciation of the real exchange rate in the coming months as this would result in the loss of export competitiveness and would affect growth. Economists say the decision would be to suspend the further strengthening of the rupee’s real exchange rate.
According to analysts’ forecasts, the national currency of India would fall below 70 rupees per dollar this year. Late last week, the rupee was trading at 68.04 per dollar.
